We are increasing FY14 and FY15 EPS estimates of BRIT by 12% and 6.5% and
target price to Rs1050 (Rs885 earlier). Thisfollows 110% PAT growth in Q2FY14 on
the back of sustained margin expansion for third consecutive quarter and 13.7%
sales growth in an environment of slowing consumer demand. BRIT continues to
gain from strong tailwinds like 1) benign input costs of Sugar, Palm oil etc. 2)
improving sales mix in biscuits 3) rising share of non‐biscuits in portfolio and 4)
gains from higher in‐house manufacturing and efficiencies in new units. BRIT is
undertaking product and packing innovations in Bourbon, Nutrichoice Cream
Cracker, 50‐50 etc. which will enable sustain growth momentum in H2. Input cost
environment will prevent further run‐up in gross margins assugar prices are down
2.5% from Q2 average, wheat prices are up 5%, while Palmoil prices are up 8%. We
are increasing gross margin estimatesto 40.1% (40.4% in H1) in FY14 and 40.3% in
FY15. We estimate standalone EPS of Rs30.2 in FY14 and Rs38.1 in FY15 and
increase 12 month target price to Rs1050 (23xSept 2015 EPS and subs at 0.75x
EV/sales), a 20% upside.
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target price to Rs1050 (Rs885 earlier). Thisfollows 110% PAT growth in Q2FY14 on
the back of sustained margin expansion for third consecutive quarter and 13.7%
sales growth in an environment of slowing consumer demand. BRIT continues to
gain from strong tailwinds like 1) benign input costs of Sugar, Palm oil etc. 2)
improving sales mix in biscuits 3) rising share of non‐biscuits in portfolio and 4)
gains from higher in‐house manufacturing and efficiencies in new units. BRIT is
undertaking product and packing innovations in Bourbon, Nutrichoice Cream
Cracker, 50‐50 etc. which will enable sustain growth momentum in H2. Input cost
environment will prevent further run‐up in gross margins assugar prices are down
2.5% from Q2 average, wheat prices are up 5%, while Palmoil prices are up 8%. We
are increasing gross margin estimatesto 40.1% (40.4% in H1) in FY14 and 40.3% in
FY15. We estimate standalone EPS of Rs30.2 in FY14 and Rs38.1 in FY15 and
increase 12 month target price to Rs1050 (23xSept 2015 EPS and subs at 0.75x
EV/sales), a 20% upside.
EBITDA margin at 9.5%; Reported PAT up 110%: BRIT reported 13.7% increase
in sales to Rs16.1bn; we estimate 6% volume growth. Gross margins expanded
380bps to 40.4%. EBITDA margin expanded by 420bps to 9.5% aided by 30bps
decline in other expenses and 10bps decline in advertising costs. EBITDA
increased 106%; 87% decline in interest cost and 66% decline in other income
enabled 119% increase in PBT to Rs1.4bn. 300bps increase in tax rate curtailed
PAT growth to 110% at Rs957m (Est 803m). Imputed subsidiary sales increased
by 7%, while PAT declined 85% to Rs20m.
Innovation and renovations to sustain growth momentum: BRIT is sustaining
strong growth amidst slowing demand scenario which indicates the gains from
aggressive marketing strategy of the mgt. We expect the growth momentum to
sustain led by innovation and packing change in brands like Nutrichoice Cream
Crackers, 50-50 and Bourbon. We expect more innovations to follow in
thecoming quarters given strong margin expansion and profit growth.
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